Market Timing And Capital Strueture

According to the classic MM theory, a company’s choice of a capital structure does not affect its value given certain assumption. Although the Pecking Order theory and static trade-off theory have modified the MM theory by relaxing some of the assumptions, they have not given up the assumption of Efficient Market. However, Behavior Finance theory suggests that as the irrational investors and the limit of arbitrage, equity market is inefficient. Under this frame, market timing theory of capital structure is developed and tested by Baker and Wurgler(2002). They believed that market timing not only affects capital structure in the short run, but also in the long run. So they conclude that the capital structure is the cumulative outcome of past attempts to time the equity market. It provides a new way to understand the capital structure.This total of six chapters, the first chapter is the introductory part, the main significance of this study described and research background, summarized and abroad on the market timing theory, the build out of this research framework; second chapter is market timing, financing behavior Theoretical analysis and capital structure. This chapter first summarizes the conventional theory of capital structure of financial factors affecting the interpretation, on this basis leads to the latest behavioral finance factors on the interpretation of the capital structure, then the timing of the financing behavior in the market analysis and market timing theory of capital structure of the theoretical analysis is presented based on four basic hypothesis of this article; Chapter financing behavior of listed companies in China’s preferences and choices. This chapter discusses the financing preference shares of China’s stock market, the causes of the regulatory policies of equity financing for the generalizations; the fourth chapter of the corporate finance market timing behavior of the impact of empirical tests, this choice of release agent season as market timing indicators, In the independent test sample test and regression analysis based on empirical analysis of market timing and financing behavior of the correlation; Chapter V is the market opportunity for the company’s capital structure empirical test, aimed at market timing and capital structure of the relationship between long-term and short-term correlation test. Focused on the IPO market timing behavior of the capital structure in the short and long term whether they were significant. Chapter VI is the conclusion of this article and inspiration, from the perspective of market regulators, to standardize and improve China’s investment and financing behavior of listed companies, the feasibility of the proposed policy recommendations.This study of market timing in the company’s financial leverage and the relationship between, the selected time window for the company’s IPO, IPO is the life cycle because the most important financial decisions. Valuation of IPO companies more difficult than the mature company valuation; Secondly, this paper draws on Alti (2006) method, HOT selected indicators to measure market timing, market timing and the traditional metrics M/B comparison, this indicator self-contained small business growth factors; In addition, China’s stock market and a major Western capital markets, the difference is that China’s capital market regulatory policies, which in the Chinese market, financing, market timing, including not only the timing of stock-based, but also including changes in regulatory policy based on the timing of the financing. Thus, in studying market timing and the relationship between the company’s financial leverage, this article focuses on regulatory policy taking into account the degree of influence on financing decisions.By the empirically study, we conclude that in the practical management of leverage, the traditional factors together with the behavior factors affect the capital structure policy.